IBM tries on a utility hat

Suppliers have been moving to sell IT as a utility like the water, electricity or telephone services. IBM has built up its hosted...

Suppliers have been moving to sell IT as a utility like the water, electricity or telephone services. IBM has built up its hosted services and is now pushing the utility concept

IBM Global Services has signed 40 contracts in Europe for e-business hosting and some of these are already in the pilot phase.

One example is a contract with food and drink producer Danone to host its SAP and Peoplesoft applications on IBM's standardised hosting infrastructure. Danone pays on a usage basis for the processing power.

This is essentially reshaping IT services as a utility, like gas or electricity, rather than a business unit.

The concept of IT as a utility has already sparked off debate in IT departments about whether it can get close to business units and really deliver value.

These arguments will, no doubt, rage on, but here I would like to look at an approach adopted by IBM, the biggest player in the market and what users can expect as the market evolves.

When you think of IBM, you think of a global company; a company that is about as nimble as an oil tanker that is a solid IT provider of a dependable size.

IBM is known for the quality of its engineering and has a tremendous heritage as a provider of "big iron", running huge transactional systems.

At the height of the dotcom boom IBM, somewhat unconvincingly, tried to re-fashion itself as a trendy e-business company. Traces of this mid-life crisis remain and the spectacle of IBM squeezing its generous midriff into high-fashion clothes was, to my mind, one of the more lamentable sights witnessed under the influence of the e-commerce bubble.

IBM misses the point when it postures as a radical software company.

The beauty of its mission to create a market for IT as a utility is that with the utility model, IBM can just relax and enjoy being itself - the company that nobody ever got fired for using.

And the giant is capable of leapfrogging the enterprise application suppliers. IBM Global Services' strong heritage as a software infrastructure company should serve it well in its endeavours in the hosted services utility space.

In the 1990s it appeared that not only had IBM lost market influence to Microsoft and the desktop, it had also lost its grip on the enterprise market to SAP and the enterprise resource planning solution providers.

However, the enterprise application behemoths and their enormous client/server code bases increasingly look to me as if they will become the IT dinosaurs of the 21st century.

The applications required for today's businesses and consumers need a different architectural approach from those delivered by the current market leaders.

And while all IT service companies are heavily reliant on the contracts driven by enterprise application implementation, integration and management work, I believe that IBM Global Services does have the cultural imagination to leap ahead in the provision of application software engineered for hosted service, utility delivery.

After all, it is unfettered by ownership of a client/server application customer base, and has a rich engineering history as an infrastructure company.

In many ways IBM appears to be on to a winner with its utility approach but it may encounter the same problems that many of the application service provider visionaries struggled with.

For example, Ovum's user research repeatedly finds that the idea of IT delivered as a utility is appealing but that it faces a credibility gap. Business users are painfully aware that mainstream software is not reliable enough or scalable enough to be delivered as a utility service.

It is already evident that IBM is far more comfortable talking about delivering IT infrastructure as a utility in the hosting and storage areas. It is far less sure about the delivery of business applications via the utility model.

But where is the real need for e-business on demand?

Essentially, most customers are buying into the concept of standardised infrastructure services delivered by IBM on a usage basis. There is little evidence, as yet, of interest in shared, standardised business application software. And without that evidence the utility model for IT is fatally flawed.

The question is whether IBM has the nerve to tackle this issue.

The risks, for service organisations, of taking on the established application suppliers are great, but they must do this if IT as a utility is to have any kind of a future.

Katy Ring is research director of e-business at Ovum

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